Wednesday, 21 September 2016

The Medium Term Expenditure Framework (MTEF) presented annually by
countries is designed to provide nations, especially the investment community
and the international institutions – World Bank, International Monetary Fund,
African Development Bank and others – more scope than the annual budget can
afford. It is usually a three- or five-year document, depending on the ambition
of the Ministry of Planning.

Nigeria had adopted the
three-year MTEF since Dr. Ngozi
Okonjo-Iweala became Federal Minister of Finance. Incidentally, she
prepared the last one in 2014 – covering 2014 to 2016. The update last year was
not carried out because President Buhari delayed in appointing ministers until
October. By then all that the Ministry could achieve was the 2016 budget – which,
being hastily prepared, has turned to be a mess now.

So, the good news is: there
is now an MTEF from the Buhari administration. At least Nigerians and the
international community have a glimpse into the minds of the nation’s economic
managers. By this time last year, we were in the dark while those illiterate in
economic matters praised the President for wasting valuable time in appointing
economic managers.

The bad news is: the MTEF
just delivered to the National Assembly
(NASS) is as defective as all the others since 1999. Certainly, on this
score, there is no “change”. It is a fact that no budget submitted to the NASS
since 1999 had been fully implemented – even when the previous governments had
all the time to prepare them.

The 2016 budget on which the
MTEF is based suffers horribly from the rush job that produced it.
Consequently, with eight months gone in the year, it is on course to be the
worst executed budget in seventeen years. With that budgetary problem as the
foundation for 2017, it is obvious why the document before the NASS can, at
best, be described as a salad bowl of illusions.

Two items on its basic
assumptions would help to illustrate the departure from reality to fantasy
which this particular MTEF represents. The first is the assumption that Nigeria
will export 2.2 million barrels of crude oil per day next year. That is lazy
thinking. The same figure had been adopted for budgeting for more than ten
years. Yet, the records would show that not even in the halcyon days of
Obasanjo, Yar’Adua and the early months of Jonathan were 2.2 million barrels
per day successfully exported.

Today, the global crude
market has been altered. There are more competitors, the global economic growth
has slowed, our former number one customer (USA) has now become an exporter and
competitor, Iran has returned to the market, Angola is now the largest African
producer and militants hold us to ransom. Shell had forecast that the current
global glut would last till the end of 2017. Can anybody seriously expect Nigeria
to achieve 2.2 million barrels per day?

Second is the projection of
N7.78 trillion expenditure for the period under review. Experienced budgeters
start from the expected result for the current year; then they add a reasonable
percentage to arrive at the forecast for the next year. Against this
time-tested approach, the Federal Government of Nigeria is presenting estimates
for next year which are totally at variance with the experience this year.

In the current year, with a
budget of N6.02 trillion, the country has so far achieved less than 60 per cent
of revenue projection. Nothing in the economic horizon suggests that the full
year’s result will be different. So, at best, the revenue for 2016 will be
about N4 trillion. Can anybody seriously suggest that the revenue next year
will double that of the current year?

Where will the money come
from? Certainly not loans or crude oil or non-oil exports. Finally, the Gross
Domestic Productivity (GDP) growth of four per cent is assumed. The same was
assumed for 2016. Yet, Nigeria has entered into a recession and registered
minus 2.6 per cent growth for the first half of the year. There are no
prospects for a reversal by December.

Meanwhile
the IMF had predicted 1.6 per cent growth for sub-Saharan Africa. Can anyone really
expect Nigeria to grow at more than double the regional average and based on
what? We call on the NASS to return the document to the President for more
work. It will amount to a monumental waste to consider it. Otherwise, they
would have to totally rework it themselves. (Vanguard)

TECTONO

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